This issue of Capital Ideas, our quarterly newsletter dedicated to business selling, business buying and financial resources for mid-market companies.
Is an Acquisition Strategy Viable For a Small Company?
By Terry Fick, Managing Director, Dallas Office
Most small companies never think about acquisition as a viable strategy, and many that do dismiss it as unfeasible. However, in some instances, a lower middle market privately held firm can reap huge benefits from acquiring one or more smaller companies or a company of equal size. That strategy is easier today than ever due to the availability, flexibility and cost of debt. Let’s take a look at one such success story implemented by a CFA client.
A B2B service company earning $5 million of EBITDA on $20 million of revenue saw acquisition as a strategy to address three issues that raised their risk profile and lowered their market value ... Read more
Seller Notes: Magical Capital
By John Hammett, Managing Director, Minneapolis Office
Why do we call seller notes “Magical Capital”?
Because seller notes have different properties depending on who is looking. Buyers treat them as debt; banks think that they are equity.
The Seller Note
A seller note is a debt security that is issued by the buyer of a company to the seller as partial payment for the company. As a debt security, a seller note has a claim on the company’s assets before the equity owned by the shareholders, but the seller note is “subordinated” to the bank loans (“senior debt”) … Read more
Situation: Global Inventures is a specialized services provider that helps customers establish technology alliances and ecosystems to promote technology standards (e.g., HDMI). In addition to promoting standards by building the member base, the company provides a full suite of outsourced back-office services and is widely recognized as a leader in its space. The CEO and founder built the business over a twenty-year period, and recognized the need to be a part of a larger organization to offer scale and services to an increasing global customer base.
Solution: Discussions with SmithBucklin, the world’s largest alliance management company, based in Chicago, began in spring of 2012. The philosophies and cultures of both companies were compatible and each provided a unique set of attributes that were complementary and synergistic. Negotiating a buy-out of the equity interest of Inventure’s major shareholders and the orderly dissolution of their stock option plan in compliance with state securities laws and the satisfaction of option holders took some time and careful planning. In May 2013, the transaction was completed. SmithBucklin acquired Inventures in a private transaction.
Corporate Finance Associates (CFA) is a founding member of ICFG, the 14th largest mid-market M&A firm in the world with over 40 offices in North and South America, Europe, and Asia. Since 1956, CFA has completed more than 5,000 transactions. CFA is ranked among the top ten of mid-market investment banks in North America and top eight in Canada by Thomson Reuters.
For additional information contact:
Douglas Nix, CA | Vice Chairman
Corporate Finance Associates | Toronto West | 905-845-4340 x211 | firstname.lastname@example.org